Correlation Between Steel Authority and V2 Retail

Can any of the company-specific risk be diversified away by investing in both Steel Authority and V2 Retail at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Steel Authority and V2 Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steel Authority of and V2 Retail Limited, you can compare the effects of market volatilities on Steel Authority and V2 Retail and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Steel Authority with a short position of V2 Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Authority and V2 Retail.

Diversification Opportunities for Steel Authority and V2 Retail

0.38

Correlation Coefficient

Steel Authority  V2 Retail

Weak diversification

The 3 months correlation between Steel and V2RETAIL is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Steel Authority of and V2 Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V2 Retail Limited and Steel Authority is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Steel Authority of are associated (or correlated) with V2 Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V2 Retail Limited has no effect on the direction of Steel Authority i.e., Steel Authority and V2 Retail go up and down completely randomly.

Pair Corralation between Steel Authority and V2 Retail

Assuming the 90 days trading horizon Steel Authority of is expected to under-perform the V2 Retail. But the stock apears to be less risky and, when comparing its historical volatility, Steel Authority of is 1.33 times less risky than V2 Retail. The stock trades about -0.04 of its potential returns per unit of risk. The V2 Retail Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  75,055  in V2 Retail Limited on September 25, 2024 and sell it today you would earn a total of  83,480  from holding V2 Retail Limited or generate 111.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Steel Authority of  vs.  V2 Retail Limited

Steel Authority

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

V2 Retail Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in V2 Retail Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, V2 Retail demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Authority and V2 Retail

The main advantage of trading using opposite Steel Authority and V2 Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Authority position performs unexpectedly, V2 Retail can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in V2 Retail will offset losses from the drop in V2 Retail's long position.

The idea behind Steel Authority of and V2 Retail Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.